I founded Endpoint Technologies Associates, Inc., an independent technology market intelligence company, in 2005. Previously, I was vice president of Client Computing at IDC, covering client PCs (desktop and mobile computers). Before that, I ran my own research and analysis firm, directed operations for a developer of multilingual text processing software, ran a technology analysis and publishing practice for a consulting company, managed international accounts for a data communications equipment manufacturer, and did new product development for a computerized trading network. I have published in a variety of forums and been quoted in a number of publications and other media outlets. I snagged a B.F.A. from Bennington College and an MBA from the University of Chicago Graduate School of Business. I am multilingual, world-traveled, and have bicycled over the Alps, but am now a family man.
Feel free to Circle me on Google+

Microsoft Is Fast Turning Into A Sideshow

So, now it’s clear: Windows 8 did not blow the doors off during the holiday. In context, this tepid launch is just one of a litany of failures fast relegating Microsoft to the status of incidental spectacle in the information technology business.

If Windows 8 is Exhibit A, Exhibit B is Windows Phone 8. Nokia has started discounting recently launched Lumia phones, indicating that they’re not exactly moving like hotcakes. Microsoft makes excuses and says these things take time, but even a fool can tell a torrid introduction from a lukewarm launch.

Thus, in the important high-mobility category (phones and tablets), where Apple and Google are cleaning up, Microsoft is 0 for 2.

More on how bad it is: An in-depth review of Windows 8 by Brian Boyko pans Windows 8 for nearly 24 minutes.

Microsoft has reached an Orwellian impasse, in which it cannot tell the truth — even to itself. It is blinded by its own hallucinations about how the market is operating. The result is that its public pronouncements entirely lack credibility.

When the Metro name had to be dropped, likely for legal reasons, the company said, “”We have used Metro style as a codename during the product development cycle across many of our product lines. As we get closer to launch and transition from industry dialog to a broad consumer dialog we will use our commercial names.” Dialog, schmialog. I’d hate to be the PR person who had to stand up and say that with a straight face.

“We don’t have a monopoly. We have market share. There’s a difference.”

“Google’s not a real company. It’s a house of cards.”

“There’s no chance that the iPhone is going to get any significant market share. No chance.”

You get the idea.

No surprise, then, that a company culture like that drives away the best people. The litany of important defections is literally too long to list. But every major group has lost its most experienced talent in the past several years. A smattering of examples: Steven Sinofsky, head of Windows Group, left as Windows 8, theoretically his baby, was launching.

Craig Mundie, the company’s chief research and strategy officer, just announced that he is abandoning the ship, completing an exodus by top appointees (the other was Ray Ozzie) that founder and former CEO Bill Gates pulled in to replace himself as he was leaving the company. Others include, Jeff Raikes, who led the Office Division; Kevin Johnson, Platform and Services head; Stephen Elop, who ran the Business Division; Robbie Bach, Entertainment and Devices chief; J Allard, another key executive from Entertainment and Devices; Chris Liddell, CFO; and Bob Muglia, head of the Server and Tools Division.

Sclerosis doesn’t even begin to describe how the company doesn’t function. Given the draconian performance review system, sometimes called “stack ranking,” employees are afraid to do anything other than play palace politics in a descending spiral of shooting down each other’s projects.

Google has even begun to gain traction against Microsoft’s Office suite with its cloud-based Google Docs productivity software.

Byzantine pricing policies, designed to bleed customers dry without a thought to a future beyond this quarter’s results, have even the most loyal Microsoft adherents in full rebellion.

And product naming conventions are both horrible and amateurish. Aside from the Metro debacle, there’s Bing, which has yet to become a verb in anyone’s mind. Other naming bloopers include Bob, HailStorm, Windows Genuine Advantage, PlaysForSure, and 2007 Microsoft Office System.

At some point, the accusing finger has to swing back toward Ballmer, who took over as CEO from Gates in 2000.

Over the years, Ballmer has made a buffoon of himself while turning out wrong call after wrong call on products, markets, and people.

Remember the Ballmer as Monkey Man dance, a moment of pure insanity? Or “Developers! Developers! Developers! Developers!” replete with sweaty shirt and cracking voice?. In the classic mashup, an aspiring YouTube artist put the two clips together and added music, with a horrifyingly funny result.

Well, even Ballmer doesn’t believe that stuff about developers anymore. Microsoft’s policies toward developers these days start with “What can you do for us?” and end with licensing policies designed to absorb any possible profit that a developer might make. No wonder they’ve all been driven to Apple and Google!

“We want them to be better than this,” said one developer who works across all platforms. “We want them to be good enough to act as a foil for Apple and Google, which otherwise will take over the universe. Ten years ago, Microsoft seemed totally unassailable. If it’s just Apple and Google, we’re so f**ked. Microsoft’s lack of innovative insight is astounding. Even in the car industry we have three companies, and that’s one of the most sewn up markets ever.”

I’ve often pondered on why capitalism doesn’t work the way it’s supposed to when it comes to reallocating resources. The theory is that a useful business attracts human and financial capital, but shouldn’t the opposite also be true? A no-longer useful business should release its capital back into the marketplace. But institutions formed during their useful phase never seem to go away voluntarily. Like fat cells clinging to a body, they want to eat, too, despite their uselessness. Over-and-done-with firms need to be pushed out of business before their dead hand can be pried from the stick.

Which leads me to ask, what is Microsoft’s useful function now? Well, there’s the business of acting as an alternative to other would-be monopolists. But that’s pretty weak. There is, however, one function that the company continues to fulfill: it operates a well at the foot of a valley where a large population brings its buckets for water. And Microsoft gets to charge a monopoly rent for its “magic” water. Never mind that there are other wells elsewhere offering cheaper water. Many people are still in the habit of coming to this one place.

As long as people continue to buy its software, which costs nothing to manufacture and delivers in some cases gross margins greater than 90%, Microsoft has a “useful” function. But, as can be noted from the trends, this situation is not going to last forever.

At this point and at the very least, Gates needs to step in and ask his friend of many years to step down. I first raised the question of Ballmer’s tenure 18 months ago. He has had ample opportunity to turn the ship around and hasn’t done it. If Microsoft is to recover from its nosedive, it will need to address multiple institutional failures — with someone else in the driver’s seat.

Post Your Comment

Post Your Reply

Forbes writers have the ability to call out member comments they find particularly interesting. Called-out comments are highlighted across the Forbes network. You'll be notified if your comment is called out.

A few things of note… First, who the heck is Bryan Boyko? As far as I can tell, he’s some out of work blogger who occasionally freelances. His article is posted under an Apple New Blog site. Biased?… yes.

Second, you cite that Google is eating into Microsoft’s office market share but don’t quantify anything and neither does the article. Sticking your finger in the wind and claiming something doesn’t make it true. Show me how much market share they have taken.

Finally, just because Microsoft wasn’t listed in the “four battles” (and who cares anyway) doesn’t relegate them to the dust bin. I didn’t see Oracle, VMware, Cisco, IBM, Samsung or any other tech giant listed either. They all battle every day and there’s a huge list of places where Microsoft is taking away market share from them.

Bryan Boyko, as you point out, Holly, is a blogger who captures essentially the counterintuitiveness of the Win8 interface. He is deliberately lamer than necessary to point these issues out. He does a good enough job of it.

Right, no statistics.

And infrastructure companies are another discussion, but I agree with your take on it.

Which part is “good enough”? He spends many minutes of his rants talking about Gremlins farting and randomness in the OS which he could have learned if he bothered to watch the training when he setup his Windows 8 profile. It teaches you to use the corners and swipe. He basically comes off as lazy and trying to create video link bait.

“We don’t have a monopoly. We have market share. There’s a difference.”

“Google’s not a real company. It’s a house of cards.”

“There’s no chance that the iPhone is going to get any significant market share. No chance.”

The most current of these quotes being a few years old. Microsoft has changed quite a bit with the introduction of Windows 7. They don’t throw the insults out like they used to. They accept that they are the underdog in some of these markets, but as one of the world’s biggest companies, they can’t go around claiming how bad things are; they have share holders to worry about.

As for products; Microsoft has solid products. Problem is getting the customer to get their hands on their products. Marketing always been an issue with Microsoft. The Zune HD was a very good device very few have even seen in person, Windows Phone is fantastic, the Surface is very good, but Windows RT needs solid developers and apps, and Windows 8 needs some polishing. Xbox is simply killing it in the video game market.

To go call Microsoft a sideshow is unfair, but you must have been in need of hits.

But, no, I don’t agree that the “new” Microsoft is humble. Their developer policies speak a lot louder than any idle talk.

And “sideshow” was rather diplomatic, I thought. If they go out of their client business, which is where all the licence volume is, then they only have the business division to go after the likes of IBM and Cisco.